PU: 90% of petrochemical players believe a second wave of investment is imminent

Construction

The poll, given to delegates at Petrochemical Update’s Downstream Engineering, Construction and Maintenance Conference in New Orleans in June, found that 46% of those polled believe the second wave will be less than half the size of the first wave.

But 26% of those respondents believe the second wave will be at least 75% the size of the first wave or bigger, and 22% believe a second wave would be the same magnitude as the first wave.

“We do think a second wave is coming. We don’t think it will be as large as the first one,” Dow’s Commercial Director of U.S. Olefins Manav Lahoti said while speaking in a panel at the Conference. “We are still optimistic about the U.S. feedstock position.

Major First Wave investments

Four crackers totaling more than 5 million ton/year of ethylene capacity are slated to start operations this year along the U.S. Gulf Coast. Five more are under construction and expected to begin operations before the end of 2019.

Some 10.3 million tons of ethylene capacity will enter the U.S. market before the end of 2019.

Most of the new plants under construction are cracker-plus projects, and the plus usually includes a polyethylene plant.

Dow told investors in May that it would invest approximately $4 billion, spread over the next five years. The primary components of this plan include expanding Dow’s new TX-9 ethylene cracker in Texas bringing the facility’s total ethylene capacity to 2 million tons and making it the largest ethylene facility in the world.

Dow also said it will begin construction of a world-scale 600,000 ton/year polyethylene unit in the U.S. Gulf Coast based on Dow’s proprietary Solution Process technology.

Among other investments, Dow announced it will invest in a new, $100 million state-of-the-art innovation center at its global headquarters in Michigan. The center will house scientists and engineers who will focus research and development activities.

“The center will support integration strategies,” Lahoti said.

Second Wave Decisions

Total announced a joint venture with Borealis and Nova Chemicals to build a 1 million/ton year cracker in Port Arthur, Texas, and a new 625,000 ton/year polyethylene plant in Bayport, Texas. A final investment decision (FID) is expected by the end of 2017 and start up by the end of 2020.

Shell announced in April that it would start construction on its 1.5 million ton/year cracker and polyethylene project in Monaca, Pennsylvania in late 2017, with startup expected in the early 2020s.

ExxonMobil and Sabic selected a site near Corpus Christi, Texas for their 1.8 million ton/year joint venture cracker complex which will include polyethylene and mono-ethylene glycol production. A FID has not been made.

LyondellBasell is evaluating expansion plans for ethylene, polyethylene, propylene, and polypropylene (PP) in the U.S., CEO Patel said at the company investor day in April.

LyondellBasell plans to make a FID in the third quarter of 2017 on its propylene oxide/tertiary butyl alcohol project for startup in 2021.

Additionally, around 5 Bcf/day of additional liquefied natural gas (LNG) export capacity is expected to be completed by 2020.

Future Focus

Leadership skills and productivity tied as the most important issue to focus on for future projects, with both getting a 42% vote.

Focusing on lessons learned was also important to players, with 16% saying lessons learned from the first wave would be their main focus for future projects.

Dow plans to focus on all three concerns, leveraging on the learnings it got from challenges during the first wave, which included productivity and skill sets, Lahoti said.

Dow announced the mechanical completion of its 1.5m ton/year cracker in Freeport, Texas, in March. The project includes 400,000 tons/year of Dow’s ELITE polyethylene (PE), 350,000 tons/year of low-density PE (LDPE), 320,000 tons/year of elastomers, and 200,000 tons/year of ethylene propylene diene monomer (EPDM). Start-up is slated for mid-2017.

“The mechanical completion was within a week of our projections we announced three years prior. We learned from issues on previous projects and applied those to this one,” Lahoti said. “Productivity of the labor force was an issue we worked on. We brought workers from outside the U.S. in to come in and help us get the skill set up. We think these solutions will help us with the second wave.”

Lahoti said it would be important for all projects in the second wave to improve not just craft labor, but also middle management and project leadership.

“If you don’t have the right eyes on the project, the project is not going to move well,” he said. “Productivity was an issue, but it was not being highlighted enough because project managers were not noting it. As an industry, we need to continue to develop management and leadership skills as well.”

Slower pace

Late engineering or scope changes were noted as the biggest project challenges by 40% of those polled.

Companies won’t be in as big of a rush to finish first this time and should spend more time on front end engineering, Henk Pauw, General Manager of Orpic’s Liwa Plastics Project in the Middle East said, while speaking in the same panel at the Conference.

“We did our feed in 12 months. We wanted to get the value out of the project and see the return quickly, but we suffered in definitions of the project,” Pauw said.

That rushing in the first wave also led to over-optimistic planning, Pauw said.

At least 10% of those polled said that project controls, including schedule, cost, forecasts, and controls were their biggest challenges to first wave projects.

“Don’t be too optimistic in delivery. One project can be six months behind because of too much optimism in planning. If something is not in the schedule, workers will get the attitude they can’t do this. Productivity drops and safety is impacted.”

Poor direct labor productivity was listed as the second biggest challenge, getting 30% of the vote. Claims management was considered the third greatest challenge, with 15% stating it was the biggest challenge.

At least 5% said that craft labor availability remained a challenge to first wave projects.